Canada Border Decision Delayed

What does a packer pay for something he doesn't need? Kevin Grier, senior market analyst for the George Morris Center at Guelph, Ontario, says that sums up the collapse of Canada's cattle markets when BSE was discovered there in May. Grier says that also sums up Canadian producers' disappointment when the BSE cow in Washington confirmed by DNA testing to be of Canadian origin likely extended the U.S.

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“What does a packer pay for something he doesn't need?” Kevin Grier, senior market analyst for the George Morris Center at Guelph, Ontario, says that sums up the collapse of Canada's cattle markets when BSE was discovered there in May.

Grier says that also sums up Canadian producers' disappointment when the BSE cow in Washington — confirmed by DNA testing to be of Canadian origin — likely extended the U.S. border closure to live cattle trade from Canada.

Ron DeHaven, USDA chief veterinary officer, said last month that the U.S. will take no action on the proposed rule to reopen the border “until the epidemiological investigation is complete, or at least until we have all of the relevant information from that investigation.”

Given that only a handful of the 80 cows that came into the U.S. with the infected cow have been tracked, it appears that investigation will continue indefinitely.

Until the apparent link surfaced between Canada and the U.S. case, Greer says Canadians were hopeful the border would open to live cattle trade by late March 2004.

Prior to the May discovery, Grier says packers were harvesting 65,000-70,000 head/week. Afterward, there were massive surpluses because the country exports nearly 70% of its beef production, 90% of it to the U.S. Ultimately, fed-cattle prices fell 66% from the pre-discovery level.

Even when prices doubled from their low to the $70/cwt. range (CAN) in September when the U.S. allowed imports of beef from fed cattle 30 months of age and younger, Grier says packers still had a 20,000-head/week surplus to absorb, or not.

When the U.S. BSE case was announced in December, Canadian prices tumbled again. Cindy McCreath, communications manager for the Canadian Cattlemen's Association, says the fed-cattle price dropped about 20¢ (CAN) initially, then recovered about half of it back early on.

Grier says there's no fundamental reason the market should have dropped. After all, beef trade with the U.S. had resumed in September and Canadian consumers had rallied around the industry and increased domestic beef consumption.

Besides, he adds, discovering another Canadian case of BSE was expected. The consensus of international studies is that it's common to find a handful of additional BSE cases, even in countries classified as minimum risk for BSE.

“The finding of an additional case, given the size of our cattle population, still is fully well below the threshold level to be considered a minimal risk country,” says Brian Evans, chief veterinary officer for the Canadian Food Inspection Agency.

“I don't know how they'll hang on now,” Grier says of Canadian producers. Cattle-feeding equity now is virtually non-existent and many feeders and producers were banking on the border opening soon. Up to now, not many folks have exited the business. The delay may change that, he says.

The U.S. decision to open its northern border has been delayed, but neither country can escape one simple fact: Because the two beef industries are integrated, BSE is a common challenge.

“It's a North American issue,” DeHaven says. “It became a North American issue on May 20 with the finding of the first North American native-born case.

“Both countries have effective surveillance programs in place. The fact that our surveillance systems picked up these two animals is evidence that our system is working,” he says.